If you read any economic, financial, or political analysis for 2010 that doesn' t mention the food shortage looming next year, throw it in the trash, as it is worthless. There is overwhelming, undeniable evidence that the world will run out of food next year. When this happens, the resulting triple digit food inflation will lead panicking central banks around the world to dump their foreign reserves to appreciate their currencies and lower the cost of food imports, causing the collapse of the dollar, the treasury market, derivative markets, and the global financial system. The US will experience economic disintegration.

The 2010 Food Crisis Means Financial Armageddon

Over the last two years, the world has faced a series of unprecedented financial crises: the collapse of the housing market, the freezing of the credit markets, the failure of Wall Street brokerage firms (Bear Stearns/Lehman Brothers), the failure of Freddie Mac and Fannie Mae, the failure of AIG, Iceland' s economic collapse, the bankruptcy of the major auto manufacturers (General Motors, Ford, and Chrysler), etc… In the face of all these challenges, the demise of the dollar, derivative markets, and the modern international system of credit has been repeatedly forecasted and feared. However, all these doomsday scenarios have so far been proved false, and, despite tremendous chaos and losses, the global financial system has held together.

The 2010 Food Crisis is different. It is THE CRISIS. The one that makes all doomsday scenarios come true. The government bailouts and central bank interventions, which have held the financial world together during the last two years, will be powerless to prevent the 2010 Food Crisis from bringing the global financial system to its knees.

Financial crisis will kick into high gear

So far the crisis has been driven by the slow and steady increase in defaults on mortgages and other loans. This is about to change. What will drive the financial crisis in 2010 will be panic about food supplies and the dollar' s plunging value. Things will start moving fast.

Dynamics Behind 2010 Food Crisis

Early in 2009, the supply and demand in agricultural markets went badly out of balance. The world experienced a catastrophic fall in food production as a result of the financial crisis (low commodity prices and lack of credit) and adverse weather on a global scale. Meanwhile, China and other Asian exporters, in an effort to preserve their economic growth, were unleashing domestic consumption long constrained by inflation fears, and demand for raw materials, especially food staples, exploded as Chinese consumers worked their way towards American-style overconsumption, prodded on by a flood of cheap credit and easy loans from the government.

Normally food prices should have already shot higher months ago, leading to lower food consumption and bringing the global food supply/demand situation back into balance. This never happened because the United States Department of Agriculture (USDA), instead of adjusting production estimates down to reflect decreased production, adjusted estimates upwards to match increasing demand from china. In this way, the USDA has brought supply and demand back into balance (on paper) and temporarily delayed a rise in food prices by ensuring a catastrophe in 2010.

Overconsumption is leading to disaster

It is absolutely key to understand that the production of agricultural goods is a fixed, once a year cycle (or twice a year in the case of double crops). The wheat, corn, soybeans and other food staples are harvested in the fall/spring and then that is it for production. It doesn' t matter how high prices go or how desperate people get, no new supply can be brought online until the next harvest at the earliest. The supply must last until the next harvest, which is why it is critical that food is correctly priced to avoid overconsumption, otherwise food shortages occur.

The USDA—by manufacturing the data needed to keep supply and demand in balance—has ensured that agricultural commodities are incorrectly priced, which has lead to overconsumption and has guaranteed disaster next year when supplies run out.

An astounding lack of awareness

The world is blissful unaware that the greatest economic/financial/political crisis ever is a few months away. While it is understandable that general public has no knowledge of what is headed their way, that same ignorance on the part of professional analysts, economists, and other highly paid financial "experts” is mind boggling, as it takes only the tiniest bit of research to realize something is going critically wrong in agricultural market.

USDA estimates for 2009/10 make no sense

All someone needs to do to know the world is headed is for food crisis is to stop reading USDA' s crop reports predicting a record soybean and corn harvests and listen to what else the USDA saying.

Specifically, the USDA has declared half the counties in the Midwest to be primary disaster areas, including 274 counties in the last 30 days alone. These designations are based on the criteria of a minimum of 30 percent loss in the value of at least one crop in the county. The chart below shows counties declared primary disaster areas by the secretary of Agriculture and the president of the United States.

The same USDA that is predicting record harvests is also declaring disaster areas across half the Midwest because of catastrophic crop losses! To eliminate any doubt that this might be an innocent mistake, the USDA is even predicting record soybean harvests in the same states (Oklahoma, Louisiana, Arkansas, and Alabama) where it has declared virtually all counties to have experienced 30 percent production losses. It isn' t rocket scientist to realize something is horribly wrong.

USDA motivated by fear of higher food prices

The USDA is terrorized by the implications of higher food prices for the US economy, most likely because it knows the immediate consequence of sharply higher food will be the collapse of the US Treasury market and the dollar, as desperate governments and central banks dump their foreign reserves to appreciate their currencies and lower the cost of food imports. Fictitious USDA estimates should be seen as proof of the dire threat posed by higher food prices, as the USDA would not have turned its production estimates into a grotesque mockery of reality if it didn't believe the alternative to be apocalyptic.

… some experts and governments, in full cognizance of the facts, want us not to create panic and paint a picture of parched crops and a looming food crisis. This, they say, would push up food prices unnaturally, lead to hoarding and ultimately result in a situation where many more millions across the world would go hungry. And whether it is the developing world or the developed, it is those at the bottom of the pyramid who are the most affected in such scenarios.This leads to a confusing divide between reality and government pronouncements, or even between the perspectives of government departments

Confusing divide between reality and government estimates

For months now, the media has been reporting two distinctly, contradicting realities. One of these realities is filled with record crops and plentiful supply, and the other is filled agricultural devastation and ruin. It has beena mad, frustrating experience to read about agricultural disasters and horrendous crop losses in virtually every state combined with predictions of a US record harvest, sometimes in the same article.

A Reality of record crops and plentiful supply

The accepted, “official” reality is found in USDA crop and WASDE reports. Here, the United States Department of Agriculture is projecting the largest US soy crop on record, at 3.3 billion bushels, and the second-largest corn crop at 12.9 billion bushels.

Below are the government' s numbers for US soybean production by state. The USDA is expecting record high soybean yields across the Midwest in 2009, leading to production numbers significantly higher than the 5 year average. The large increase estimated between the August and November also indicates that the USDA doesn' t believe crops suffered much damage during the fall harvest.

Soybean Production by State and United States

Production (1000 bushels)

5 year

USDA 2009 Estimates

Average

Aug

Nov

Alabama

6,114

14,080

15,910

Arkansas

111,779

127,300

128,060

Delaware

5,659

6,392

7,137

Georgia

7,484

15,360

14,850

Illinois

441,931

398,200

420,750

Indiana

259,870

246,600

249,780

Iowa

485,196

505,960

486,030

Kansas

104,300

133,000

156,950

Kentucky

49,594

57,200

64,860

Louisiana

29,624

35,000

35,890

Maryland

15,670

15,840

20,425

Michigan

76,587

73,630

77,610

Minnesota

278,520

284,000

298,200

Mississippi

59,995

88,970

77,040

Missouri

193,063

214,000

233,200

Nebraska

225,809

227,850

247,000

New Jersey

2,995

3,060

3,480

New York

8,405

10,332

10,836

North Carolina

43,882

56,320

59,840

North Dakota

104,078

116,000

115,500

Ohio

197,408

215,260

219,840

Oklahoma

6,793

8,250

10,360

Pennsylvania

17,720

20,025

20,915

South Carolina

11,972

15,930

15,120

South Dakota

135,970

159,100

172,200

Tennessee

40,616

62,400

62,730

Texas

5,342

5,250

4,485

Virginia

16,754

18,880

21,460

Wisconsin

61,494

63,570

66,830

Other

1,131

1,413

1,982

US

3,005,755

3,199,172

3,319,270

Since the United States is the leading exporter of corn and soybeans, producing 40 percent of the global corn crop and 38 percent of all soybeans, the USDA's production numbers have an enormous impact on the global supply/demand picture.

A Reality of Agricultural Devastation and Ruin

In this reality, the US farmers have suffered the worst harvest season ever seen. For those who have not been following my blog or developments in the agricultural world, below are a few of extracts, in chronological order, showing the full extent of the devastation experienced by farmers during 2009' s hellish harvest season. (to keep this short, I have limited it to 2 extracts per state)

"I'd say this year is one of the most unusual years we've had in the last 20 years," said Don Fry, executive director of the Des Moines County USDA Farm Services Agency. "Because it seems like it rains every second or third day, the ground is constantly kept wet. We've heard a lot of reports from people with wet spots turning up in fields that they and their parents ... don't ever remember being a wet spot."The combination of constant rain and cool temperatures this spring kept farm fields saturated, making planting difficult and hampering crop growth. Also, frequent rains have rinsed a portion of nitrogen fertilizers from fields and hindered the application of herbicides, all of which cuts into yields,Kester said."This spring has just been a terrible struggle," Kester said. "Anybody that mowed hay within the last three weeks probably lost their hay crop because it got wet."

Lethal heat, hailstones as big as baseballs, rain seemingly without end and tornadoes, some reported to be a quarter- to a half-mile wide.After a relatively placid May, Nebraska's weather went from meek to mad in June.

“I don't know where that switch in the sky is, but it turned on,” said Ken Dewey, an applied climatologist with the University of Nebraska-Lincoln.…“It rained somewhere in Nebraska every day of the month,” Dutcher said. For 25 of those days, some part of the state got more than an inch of rain; for seven of those days, some part received more than 3 inches.

The Panhandle received so much rain, damage reports could end up showing that 1,000 miles of roadway were washed out,according to the Nebraska Emergency Management Agency.Widespread hail was reported across the state, with one rancher telling the National Weather Service that he found dead animals along the road. In the far western Panhandle, it hailed so much that the roads had to be plowed, as hail reached 6 to 8 inches deep.…According to the federal Farm Service Agency, some 750,000 acres of crops were damaged and a small percentage destroyed.

This has been a bad year for dairy farmers: Milk prices have plummeted and rain has prevented them from getting onto their fields to harvest hay. Fertilizer they applied simply washed away in the rain.The longer hay grows without a cutting, the poorer the nutritional quality and the more money farmers will spend this winter to supplement it. Cornfields are rotting without enough sun or heat to ripen the plants."The season is lost," Julie Marie Bickford of the Maine Dairy Industry Association said Friday. "With milk prices so low and this feed disaster on top of it, farmers are like deer in the headlights."…Hay and corn are critical components of livestock feed, Bickford said. "This stunted corn and alfalfa is forcing farmers to purchase grain and feeds. That is a very bad situation. Prices are extremely high because of the Midwest floods earlier this year. Maine's farmers couldn't come up with a worse situation in their worst dreams."On Thursday, a 75-year-old former dairy farmer visited the Wright Place in Clinton. He recalled delivering glass bottles of milk and told Brian Wright that he never remembered a rainier summer."This is unreal," Wright said.

For Kevin Leahy, it' s a total loss. He doubts any of his 600 acres — of what used to resemble corn — north of Shullsburg will be harvested.…Kamps was at home during the storm and knew his crops would be in trouble when the oak leaves around his house started falling to the ground. The wind blew a drift of hail more than 2 feet high in front of his patio door, he said.

“It was like a big sand blaster,”Kamps said. “I' ve seen damage before but not near so widespread and so major. This took everything we had.”

[Iowa, August 4]When hail decimated crops near Lawler and Waucoma in June, it was the worst Iowa State University Extension field agronomist Brian Lang had ever seen.

Until July 24.

"I've never really seen bad hailed corn at tassel state and I've never seen it this bad, this widespread," Lang said. "There were 400,000 acres damaged with 10 percent totally destroyed. Even for the crop that didn't get hurt too much, this came at the worst possible time, tasseling."…"I've never seen a hail storm this big," said Julie Vulk, Farm Service Agency executive director in Winneshiek County and interim director in Fayette County. "It's just hard to wrap your brain around it."

WEST WINFIELD - A panel of political representatives and aides sat for over three hours at a rally Friday in Mount Markham Middle School gym as over 200 upstate New York dairy farmers pleaded for action on a range of issues crippling their industry.

One after another dairy farmers and others involved in the industry took a microphone to berate county, state and federal representatives from throughout the region.

Some were brought to tears describing their inability to make a living, a few simply screamed in frustration and others demanded answers. But the dire situation facing the men and women speaking was painfully clear.

“We are in a disaster,” declared Ken Dibbell, of Chenango County.…“The people who feed the nation can' t feed themselves,” Gretchen Maine, a dairy farmer from Waterville, “what' s wrong this picture.”…The time frames for both solutions seemed in contrast from farmers need for help,with many emotionally explaining they have either already abandon businesses or are on the brink.

“I don' t think they get the message yet,” Tewksbury said, referring politicians unaware of the uncharacteristic display of emotions from prideful farmers. They don' t have until 2010. They have the next couple of months to decide if they can stay in business, he said.

[Texas, August 14]Texas state climatologist John Nielsen-Gammon said Friday that at least nine of the 254 counties in Texas — the nation's most drought-stricken state — are suffering through their driest conditions since modern record-keeping began in 1895.

Making matters worse are therelentless 100-degree days across the southern portion of Texas that has been under drought conditions since September 2007.The impact has been felt most by farmers and ranchers in the nation's No. 2 agriculture-producing state. Texas officials estimate statewide crop and livestock losses from the drought at $3.6 billion."We've had some dry spells, but not as bad as this," said Rod Santa Ana with the Texas AgriLife Extension Service. "It hurts bad. A lot of these cotton fields didn't even come up. It's just bare ground. You'd never know cotton was even planted there."

That's little comfort to David Kane, a rancher near Sheridan, Wyo., who said the grasshoppers on his ranch are the worst they've been in more than 20 years. Kane already sold off part of his herd because the pests ate his cows' food.

"They're devastating," Kane said. "They were so bad here on the ranch that we sprayed our meadows because the second-cutting of alfalfa wouldn't green up because they were eating it as fast as it was trying to grow."

[Wyoming, September 10]The Big Horn Basin dry bean harvest is beginning, but cool, rainy weather and diseases have taken tolls on yield.Mike Moore, manager of the University of Wyoming Seed Certification Service, said his agency is just starting windrow inspections, and some fields are not doing well.

“It' s sort of tough out there right now,” he said. The only area that seems less affected by disease is the far southern end of the Big Horn Basin, Moore said. His inspectors have found blight and mold around Powell, Byron, Emblem and Burlington.

“It doesn' t look like location is going to allow you to escape it,” he said.

Bruce Wetzel has been a farmer in Sherman all his life, learning from his father back in the 1960's.

He's seen all the ups and downs of producing wheat and corn in Texoma, and he says this was one of the worst years for corn.…"All the rain we got back in April and May, we got 20 inches of rain in a two week period there, really just damaged our corn. Our corn just never quite recovered from too much water,” said Wetzel.

Wetzel says he lost about 50% of his wheat and corn crops this harvest season, a trend that farmers are experiencing across Texoma.

"The rains have just killed me this year," said Tucker Gant, 51, a vegetable and fruit farmer in Elk, who estimates his total losses this year at nearly $220,000.…"Nobody has ever seen rain as drastic as this year, even talking to old-time farmers," said Grasso, a third-generation farmer who estimates losses so far at roughly $50,000.…"It's never been that bad as far as I can remember,"said Gant, pointing to water pooling in a field as he drove his pickup truck along a bumpy dirt trail toward 35 acres of barley overrun by tall weeds. "I have never seen water lay there more than two days. It should have been harvested, but you can't harvest weeds taller than barley."

North Dakota`s wet spring and summer is being followed by a wet and snowy fall.

Two snowstorms have already turned the ground in much of the state white, and while the early snows will melt before winter sets in, many farmers may not get row crops harvested before the seasons change again, unless Mother Nature provides them with some dry weather.

In North Dakota, it`s common to see autumn snow coat the state`s sunflower and corn crops, but acres and acres of soybeans covered in white is an unusual sight. October snowstorms have stopped many of the state`s combines right in their tracks, delaying the harvest of many late season crops.…Precipitation totals in some areas of North Dakota have already surpassed yearly averages, but farmers are more concerned about wet weather damaging the condition of the soybean crop than corn and sunflowers.

Three weeks of heavy rains are threatening northeastern Louisiana's soybean, sweet potato and cotton crops, some of which have already shown significant deterioration in the fields.

"It's killing us," said Ouachita Parish producer Gary Mathes. "We cut some beans a week ago that we had to sell at a salvage price of $3 a bushel."…"We fought a short corn crop, but we had one heck of a bean crop and the rain is taking it away from us,"Mathes said.

Venoy Kinnaird said his farm has been drenched by about 20 inches of rain since Sept. 12."I've got some beans that I won't cut; they're not salvageable," Kinnaird said. "And I've got some sweet potatoes that are halfway out of the ground. Cotton has taken a terrible hit, too, even though we don't have that much planted around here this year.

"We're absolutely waterlogged. What's really bad is we're coming off of a disaster last fall."

[Nebraska, Minnesota, October 12]Weekend snow may have dealt a heavy blow to prospects for soybean harvest in Nebraska and other nearby states.

Weather adversity could shave as much as 200 million to 300 million bushels from expectations for a 3.25 billion bushel crop nationally, a Nebraska soybean official said Monday.

"Our part of the country got snow," said Victor Bohuslavsky of the Nebraska Soybean Board Monday. "And I talked to people in Minnesota this morning and they hadn't hardly started harvest and they were blasted with snow."

Northeastern Louisiana farmers finally saw the sun Friday afternoon, but it might be too late to save the bulk of the soybean, cotton and sweet potato crops.

"It's pitiful," said Caldwell Parish producer Drew Keahey. "I think it's going to be worse than last year."…But some parishes, like Morehouse, have received more than 30 inches of rain since Sept. 12, literally drowning crops that were mature and ready for harvest when the rain began.…Soybeans may have suffered the most, producers said.

"There will be a lot of beans that never come out of the field," Keahey said.

Harvest so far has been about as awful as the new Bob Dylan Christmas album.Typically USDA's November yield forecasts increase, but this is not a typical year, as freezing weather has dinged yields and caused major crop quality problems.A colleague of mine sent me some snapshots of an Iowa farm that had seven inches of snow last Saturday. Northern Kansas had over 10 inches of snow.

Corn will suffer from quality issues. Soybeans will have significant quality and yield losses if harvested. Rice will suffer quality and yield losses with much of the crop is on the ground. Cotton crop will suffer yield and quality losses and cottonseed will have essentially no value.…Bolstering this is a fact-sheet released the week of Oct. 12 by Delta Council. The release says, “Large areas of the Mississippi Delta have received 15 to 20 inches of rain over the last 30 days with many areas receiving 25 to 40 inches of rainfall over the past 60 days since Aug. 15. In places this is anywhere from 400 to over 600 percent of normal.”

The Delta Council release also quotes Steve Martin, interim head of the Delta Research and Extension Center (DREC) in Stoneville, Miss.: “Crop conditions are rapidly deteriorating. The USDA weather service at Stoneville reports that October has seen the second highest level of rainfall ever recorded (record was set in 1941).

[Illinois, November 2]The autumn monsoons are hard to figure, said Benjamin Sittrell, a meteorologist for the National Weather Service office in suburban St. Louis.

"Typically during the late-year period, it's our driest portion of the year," Sittrell said. "To see such astronomically high amounts of precipitation, where we got several inches above the previous record levels, is very abnormal.Sittrell said thousands of acres of farmland are under water, particularly in the flat areas of southern and western Illinois, where the Illinois, Ohio and Kaskaskia rivers are among several that are flooding.

On Monday and Tuesday, Gus Wilson, Chicot County Extension staff chairman for the University of Arkansas Division of Agriculture, made the rounds, visiting farmers and getting a first-hand look at what record rain has left of crops in the state' s southeasternmost county.…“It' s bleak,” Wilson said. “It' s going to really hurt these poor Delta counties because here, agriculture is all that we' ve got.”

Earlier this season, the harvest outlook was promising.

“In September, I was pretty happy with what I was seeing in the fields,” he said. “Now we are going to be lucky to make half a crop compared to the last couple of years, all because of the weather.”

“Seven or eight weeks ago, we were looking at 1,100- to 1,200-pound cotton” lint yield per acre, Wilson said. “Now we' re 500 to 600 pounds.”The soybeans are just as bad. Back in September, “we had a good soybean crop. The yield was there,” he said. “We have lost at least 60 percent to 80 percent due to the weather.”

“Our rice is going to be half,” Wilson said.…“This is the worst I' ve ever seen and I' ve been a county agent for eight years and around farming all my life,” Wilson said.

Alabama Commissioner of Agriculture Ron Sparks is calling it a “potential crisis” — the rainy weather conditions throughout most of September and October that have frustrated growers who were eyeing pretty good cotton, peanut, soybean and corn crops.

The same holds true for producers in Georgia and north Florida, where harvest has been delayed by almost continuous rainfall, during what is usually the driest months of the year.

“Prior to September, many producers were expecting to harvest a bumper crop and were very optimistic for the upcoming harvest season,” says Sparks. “Uncommon and unfavorable precipitation during September and October have degraded various crops and caused poor harvesting conditions, which caused the harvest to be behind schedule by around four to six weeks.”

The major crops affected by the recent rainfall are cotton, soybeans, corn and peanuts, says the Commissioner. “Reports indicate that our state is in dire need of dry weather within the next two weeks, which may eliminate a potential state disaster [Area was then hit by 5+ inches of rains from Topical Storm Ida],” he said in early November. “Producers are already suffering from heavy September and October rainfall and dry conditions will not eliminate damage that has already taken place to crops across the state. Many producers are experiencing a sharp decrease in crop yield, lower grading, and crop damage from recent rainfall.”…“The bottom line is that Alabama producers are uncertain as to what the commodity markets will bring forth and where agriculture in our state is going,” says Sparks. “The recent weather conditions over the past two months will definitely have a negative impact on Alabama' s crop harvest.”…William Birdsong, agronomist at the Wiregrass Research and Extension Center in southwest Alabama, reported that wet and rainy conditions continued to delay harvest for row crops. Cotton yields and lint quality continued to suffer as a result of the wet conditions, he said. Less than 5 percent had been harvested in his area, and this could go down as the worst crop in years if the rain does not subside.

What had started as a good season for cotton could be a complete loss for some farmersif heavy rains hit fields before harvest, said Richard Petcher, agent with the Alabama Cooperative Extension Service."It's been a 30 percent loss so far in southwest Alabama, and more rain could make it 40 to 50 percent,"Petcher said Monday."Some fields are already a 100 percent loss."

Financial damage from Ida could be in the millions of dollars for Alabama farmers, he said. Rains have delayed harvests by about three weeks affecting not only cotton but also leaving some peanut crops vulnerable to early frosts."The majority of the cotton crop is still in the fields," he said. "Peanuts are about 60 percent harvested. There's been concern about rain, but now it's almost panic."Soybeans have also been hurt by rain, with crops rotting and sprouting in the fields,Petcher said.

On Nov. 4, Gus Wilson took a sample of soybeans with 100 percent damage.

“It was the first time I' ve seen that,” says the Chicot County, Ark., Extension staff chair. “The situation here is bad, bleak. We' ll be lucky to make half the crop we' ve made in the last three to four years. That' s strictly due to the weather.”

Chicot County in extreme southeast Arkansas has caught huge rains all fall. Now, watching crops deteriorate, Wilson says he' s not seen “a group of growers who' ve been more discouraged. Those who were planning to plant wheat may be out of luck. If there' s wheat planted and emerged in Chicot County, I don' t know where it' s at.”…Faced with a seemingly unceasing deluge in 2009, veteran farmers are struggling to come up with a similar year in the past.

“My father is 82 years old and he' s farmed 55 to 60 years,” says Wilson. “He says this is the worst harvest season he' s ever seen. Out of his career, he said only one year comes close — he can' t remember if it was in the late 1950s or early 1960s.

Last week's torrential rainfalls have caused damage and delays to some Virginia farm crops, but the extent of losses is unknown, some agriculture experts said yesterday.

Several crops that were recently planted or still in the fields were hurt by the widespread, three-day deluge, including winter wheat, barley and soybeans, said Molly Payne Pugh, executive director of the Virginia Grain Producers Association.

"There is definitely going to be damage,"Pugh said. "I don't have a good feel for how much yet. Right now, we are assessing."

[Mississippi, November 23]On the dashboard of his truck, Allen C. Evans III, a farmer near Clarksdale, has a sheaf of receipts from the grain elevator, showing the damage levels of each load of soybeans: 39.9 percent, 67.9 percent, 51.8 percent. A born fretter, he is afraid to call, he said, to find out the final reckoning of the disastrous season.

"You're just kind of walking around like a zombie," Mr. Evans said, "saying, never could I have guessed that the best crop I've ever raised in my entire life - the one I never worried about - of all the crops to have taken away from us, how can this be the one?"In the Delta, those elevator receipts have become talismans of the times.Michael Patterson, who helps pay for his farming with the proceeds from his grain hauling company, displayed one showing a farmer who brought in 1,110 bushels of soybeans, but got paid for 11.The rest were damaged.

That farmer was distraught, Mr. Patterson said.

“You don' t want to be the generation,” he said, “that loses the family farm.”

These two realities can' t coexist!

Farmers can' t be going bankrupt across the US thanks to the worst harvest season ever seen while at the same time producing the USDA's Biggest Crop Ever! Someone is lying, and evidence supports the farmer' s story.

Adverse weather conditions across the globe

American farmers weren' t alone in their suffering this year. Abnormal weather has ruined crops around the world in 2009:

2) Australia is suffering the longest running and most severe drought on the planet. November temperature records were broken all over eastern Australia, and lower wheat yields than expected were reported, leading to production estimate cuts. Profarmer Australia has cut their Australian wheat production estimate by 1 MMT to 20.9 MMT, and Commonwealth Bank of Australia reduced their estimate by 0.7 MMT to 21.6 MMT (USDA's current estimate is, of course, is an insane 23.5 MMT).

Between the effects of the financial crisis and the abnormal weather experienced across the globe, the idea that 2009/10 saw record harvests of anything is pure fantasy.

US Soybeans Supply and DemandAnalyzing U.S. soybeans supply and demand reveals how bad the situation is. The US is the biggest producer and exporter of soybeans, and, when America runns out of soybeans, it will create panic.

Below are the latest figures from the USDA. Highlighted in red are the problem numbers which need serious adjustment to reflect reality.

U.S. Soybeans Supply and Demand

(Million metric tons)

USDA

Numbers

Beginning stocks

3.76

Plus:

Production

90.33

Imports

0.22

Minus:

Crushings

46.13

Exports

36.47

Seed

2.56

Residual

2.20

Ending stocks

6.95

No beginning stocks of US SoybeanBy the end of August, grain movement in the US came to a virtual standstill, with farmers sold out of soybeans. Those few soybean end-users (ie: feedmakers and poultry producers) which caught short were forced to pay prices as high as they paid at the very height of the bull market in 2008.The struggle to secure quick-delivery soybeans in the US cash markets sent soybean futures into intense backwardation (backwardation is when cash prices are higher than future prices). Desperate Midwest crushers were bidding up to $2.72 a bushel over CBOT September futures contracts to acquire scarce soybean supplies. Some processors in the heart of the Midwest soy belt grew so desperate for soybeans to crush that they paid to transport some of the early harvest from the Mississippi River Delta northward to Illinois.

The chart below shows the backwardation of soybean futures on August 28. Notice the huge price gap between promises to September and November contracts. Notice the even larger gap between cash prices and September futures.

Finally, at the end of 2008/09, these was a huge about of amount of soybean sales outstanding, 2,216,016 MT, which were rolled over into the 2009/10 crop year. This means the exporters couldn't find enough soybeans to make good on the 36,069,606 MT of soybeans they sold last year. Basically, the US ran out of soybeans in August 2009, and the beginning stock of US soybeans should be considered zero for 2009/10.

Export Sales

Outstanding

(metric tons)

At Year End

2001/02

446,721

2002/03

459,879

2003/04

291,586

2004/05

624,737

2005/06

813,820

2006/07

946,268

2007/08

888,059

2008/09

2,216,016

Real number for US Soybean ProductionThe graphic below shows 2008 Soybean Production by country, which should be an accurate representation of where they were grown in 2009.

The next graph also shows 2008 Soybean Production with soybean producing counties declared disaster areas in 2009 highlighted in red, which should provide be an accurate representation of how badly production was effected this year. Keep in mind that

1) Many counties that weren' t declared disaster areas based on the USDA' s requirement of 30% damage, still suffered 10 to 20 percent losses.

Based on USDA' s disaster declarations and reports of horrendous crop losses, a realistic estimate of US soybean production would be below 2007/08 soybean production at around 70 MMT (Million Metric Tons).

Real number for US Soybean exports

The chart below showing outstanding soybean export sales shows what is wrong with the USDA' s export estimates for 2009/10.

Outstanding soybean export sales represent the amount of soybeans that have been sold but not yet exported. At any point in time, it is possible to buy "old crop" soybeans (already harvested) or "new crop" soybeans (which will be harvested next year). Outstanding soybean export sales rise until harvest and then go down as soybeans start being exported.

Predicting total 2009/10 exports using outstanding export sales data

On average, total soybean exports for the last eight years has been 3.6 times the peak in outstanding export sales.

Peak in

Acc Exports /

Accumulated

Outstanding

Peak outstanding

Crop year

Exports

Export Sales

sales

2001/02

29,926,021

6,445,789

4.6

2002/03

29,102,246

8,499,004

3.4

2003/04

24,176,072

8,261,700

2.9

2004/05

29,966,013

8,206,497

3.7

2005/06

25,510,276

5,808,523

4.4

2006/07

30,288,289

8,592,069

3.5

2007/08

30,449,470

9,797,062

3.1

2008/09

33,853,590

10,002,895

3.4

2008/09

19,426,479

Average

3.6

If the pattern from the last eight years holds true, 2009/10's peak outstanding export sales of 19 MMT implies total exports of roughly 70 MMT for 2009/10.

2009 peak outstanding export sales

19,426,479

3.6

Implied exports for 2009/10

69,935,324

US Soybean Supply and Demand catastrophically out of balance

The table below shows the USDA Numbers compared to more realistic estimates.

U.S. Soybeans Supply and Demand

(Million metric tons)

USDA

Realistic

Numbers

Numbers

Beginning stocks

3.76

0

Plus:

Production

90.33

70

Imports

0.22

0.22

Minus:

Crushings

46.13

46.13

Exports

36.47

70

Seed

2.56

2.56

Residual

2.20

2.20

Ending stocks

6.95

(50.67)

Of course a negative ending stock isn' t possible. This just means that the US will run out of soybeans before next September. The process is well under way.

The chart below shows US monthly soybean exports for the last year, and, again, the problem is obvious.

The US exported over 7 MMT of soybeans in November! Furthermore, since the US exported 3.7 MMT in the first two weeks of December, the rate of exports isn' t slowing down. At this rate the US soybean supplies will start running critically low around March/April.

Economic Pandemonium

The true financial crisis begins when the world realizes that there are couple months food supply missing from 2010. The last two years were a gentle, mild preview of the real thing.

Total Panic

The sudden, shocking discovery that food supplies are running out will produce total panic. The reaction will inventory building — hoarding —at all levels. Major food producing nation will export bans (India has already banned food exports). Producers, Middlemen, And Households will rush the acquire supplies. All this hoarding will wrosen the crisis by throwing supply and demand further out of balance: export bans cut supply available on international market and inventory building increases demand. Food prices will more than double.

Central bank exodus from the dollar

With one out of eight Americans on food stamps, foreign central banks are subsidizing US food consumption by funding the US government with their treasury purchases. Once the food crisis begins next year, they will be faced with the choice:

1) Continue subsidizing US food consumptions as triple digit food inflation ravages their economy and their people starve.2) Dump their treasury holdings onto the market to rapidly appreciate their currencies, lowering the cost of food imports and preventing widespread domestic starvation.

Not much of choice. China, for example, will drop the dollar peg without a second thought to prevent triple digit food inflation from damaging its economy and causing widespread of social unrest. Chinese exporters will be badly hurt, but that will be a small cost if it can keep food prices down.

Food prices are rising faster than any other commodity and food prices hit the poor the most.While overall inflation is just 3 per cent, food prices are rising at unforgivable 17.7 per cent. Prices of rice and wheat have gone up in double digits in one year (10 per cent).…Perhaps the most surprising is that while food prices are rising, the government seems to be doing nothing, although it is fortunate to have many policy options at hand.

One option is to release food grain stocks[which unfortunately, DON' T EXIST], say analysts. They argue why should wheat and rice prices rise when India has near record stocks of food grains.…The second option that the government has to reduce the inflation in potatoes, onions and pulses is to use some of India's enormous reserves of foreign exchange to import these food items so crucial for the poor.India today has $270 billion in forex reserves. A small fraction of this could be used to import food and help the poorest.

“But the dollar can' t collapse because there is no alternative to the US dollar for a reserve currency…”

I love the "there is no alternative to the US dollar for a reserve currency" argument. Every time I hear it, I imagine someone standing on the deck of the Titanic on the night of April 14, 1912, and declaring, "This boat can't possibly sink because there aren't enough lifeboats!"

The lack of viable alternatives doesn't mean the dollar can't sink, it simply means that when it does go down, it will result in a tragedy of epic proportions which will be remembered for centuries to come.

Political Fallout of 2010 Food Panic

While a food crisis was unavoidable to some extent because of the abnormal weather and financial crisis, the total panic which will soon grip world agricultural markets is a creation of the USDA and its fictitious production estimates. If not for the USDA's interference, food prices would have risen in the first half of 2009 in anticipation of the 2009/10 shortage. The United States Department of Agriculture, has caused incalculable damage to the world economy by encouraging overconsumption of rapidly diminishing food supplies.

Once the 2010 Food Crisis starts, confidence in the US government will be shattered as a result of the USDA' s faulty estimates. The starvation and misery caused by higher food prices will also create a lot of anger…

Insolvent Midwestern banks

With failed crops, farmers across the Midwest are bankrupt, and so are their banks. This is especially important considering that the FDIC is out of money. Every bank failure is now being financed with the immediate sale of treasuries.

Whether the US choose to bail out Midwest banks with billions of emergency aid for bankrupt farmers or finances the FDIC takeover of their banks, the outcome will be the same. The enormous quantity of debt which the US will need to sell to finance emergency aid and resolve bank failures in the Midwest will pressure an already collapsing market for US treasuries.

Panic selling of distressed debt

When the dollar starts rapidly losing value, the flaw in the whole “hold to maturity strategy” will be revealed. Financial institutions around the world will realize that the dollar will lose all value years before their toxic assets ever have the chance to mature. They will then begin dumping trillions of toxic US debt at firesale prices, simply to escape the dollar's devaluation.

Self-reinforcing Breakdown of derivative markets and US financial system

Short term treasuries function as the collateral backing derivative markets and US financial system. When the dollar and treasuries start falling in value with exit of foreign central banks, investors will lose confidence in that collateral and start withdrawing from derivative markets. This will result in a flood of new treasuries coming onto the market as collateral is liquidated, causing further loss of confidence, and so on.

It is easy to see why, with the treasury market breaking down, investors will question the wisdom of investing in a fund that has over 76% of its assets in US bonds. Investors will start withdrawing their money from the fund, and PCRCX will have to sell treasuries into a market already filled with only sellers. This “run on the bank” dynamic will gain steam until it leads to the collapse of derivative markets and the US financial system.

The use of a single asset class as collateral for an entire financial system is idiotic. There is no such thing as liquidity of investment for the community as a whole.

derivative casino will be bankrupt

derivatives are essentially bets (about future value of commodities, currencies, bonds, etc). Like gambling at casinos, to make money in derivative markets requires meeting two conditions:

1) Being on the winning side of the bet.2) Being able to collect on the bet.

The point here is that it doesn't matter how many chips are won if the casino goes bankrupt before they can be traded in.

There is about $14 Trillion collateral behind listed/OTC derivative markets, and this collateral is invested in short term dollar-denominated debt. As the dollar and credit markets collapse, this collateral will lose all value (the equivalent of a casino going bankrupt). Investors trying to collect on profitable bets (ie: call options on gold) will find their derivative contracts backed by insolvent counterparties and worthless debt.

Warped perception of riskRight now,the entire commodity derivative market is built on the idea of no default risk.This is to say, investor are now taking default risks very seriously in the credit markets (after experiencing horrible loses due to financial crisis), butthese concerns over counterparty solvency are completely absent in commodity derivatives. When the the dollar, treasuries and derative markets start collapsing, concerned investors will start wondering who is on the other side of their commodity investments, and they will be horrified at what they find out.

Deflationary panic in commodity markets

The biggest sellers of commodity IOUs are insolvent institutions desperate for funding. They are taking advantage of the warped perception of risk to raise capital cheaply. For example, investors in commodity derivatives will be thrilled to learn that completely-insolvent, taxpayer-bailed-out AIG Financial Product is a key player in commodity derivatives.

AIG Financial Products and it subsidiary Banque AIG have been key players in the development of commodities as an asset class and has been active in this space since 1991. AIG Financial Products provides clients with a full suite of commodity offerings, including OTC derivatives on both individual commodities and commodity indices, structured products, and bespoke commodity investment solutions. As the creator of a leading benchmark for commodities investing, the Dow Jones - AIG Commodity IndexSM, AIG Financial Products helped spearhead the rapid growth of commodity-based investment in recent years and as of the end of the third quarter of 2006, there was an estimated $30 billion tracking the DJ-AIGCI.

Insolvent institutions like AIGFP have been very active and creative in selling all kinds of commodity investments to anyone foolish enough to buy them. Take for example commodity linked structured notes being sold to retail investors, banks, and commodity funds.

Retail and institutional investors alike are piling into commodity-linked structured notes according to the firm MTN-I, even as overall sales of structured notes declined.

Sales of commodity-linked notes rose to $15.8 billion over the first half of 2008, up from $7.8 billion over the same period a year ago, according to MTN-I……About 77% of all commodity-linked structured notes sold so far this year were issued by investment banks. MTN-I's research showed Deutsche Bank leading sales in the first half of 2008, with 59% of all sales. Barclays was second with 13% and Credit Suisse third with 5%. Merrill Lynch, across various entities, represented a little over 5% of sales.…Typically structured notes are unsecured, which puts buyers at risk if issuers go into bankruptcy. That wasn't a concern of most institutional investors until the events of this fall. The bankruptcy of Lehman Brothers, however, quickly left buyers on the hook and possibly unable to recoup their capital.Other troubled financial institutions that have issued commodity structured notes include insurance giant American International Group (AIG), UBS AG (UBS), Morgan Stanley (MS) and French bank Dexia (HIB4.BE).

ETFS Agriculture DJ-AIGCISM (AIGA) is designed to track the DJ-AIG Agriculture Sub-IndexSM and pays a capitalised interest return which cumulates daily. The Sub-Index is an "excess return" index and the interest component combines to give a total return investment.…AIGA is backed by matching Commodity Contracts purchased from AIG Financial Products Corp. (AIG-FP) whose payment obligations are guaranteed by American International Group, Inc (AIG) and backed 100% by collateral held by the collateral manager BNY Mellon in a separate account and adjusted daily.

As investors realize who is on the other side of their investments, it will lead to a deflationary panic in commodity markets, with all but the most trusted commodity investments being abandoned. Insolvent institutions like AIG will lose a critical source of funding and, more importantly, investment demand, instead of being absorbed by the IOUs of insolvent institutions, will flow directly into physical commodities, driving up prices.

The Federal Reserve will print trillions

If the treasury market collapses, the government will lose the ability to sell debt to fund itself, which isn' t an option. To preventing such a collapse, the Federal Reserve will have to make purchases in the trillions despite already having run out of room on its balance sheet, which means it will have to print money. A massive expansion of the Fed' s balance sheet at a time of when inflation is spiraling out of control will destroy all confidence in the dollar, worsening the currency crisis.

Before World War I Germany was a prosperous country, with a gold-backed currency, expanding industry, and world leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the French franc, and the Italian lira all had about equal value, and all were exchanged four or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper.Most Germans were taken by surprise by the financial tornado.

"My father was a lawyer," says Walter Levy, an internationally known German-born oil consultant in New York, "and he had taken out an insurance policy in 1903, and every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread."

…More than inflation, the Germans feared unemployment.In 1919 Communists had tried to take over, and severe unemployment might give the Communists another chance. The great German industrial combines -- Krupp, Thyssen, Farben, Stinnes -- condoned the inflation and survived it well.A cheaper Mark, they reasoned, would make German goods cheap and easy to export, and they needed the export earnings to buy raw materials abroad. Inflation kept everyone working.

So the printing presses ran, and once they began to run, they were hard to stop.The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."

The presses of the Reichsbank could not keep up though they ran through the night. Individual cities and states began to issue their own money. …The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins.The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee.Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old.

The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon.There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy."When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning.

…But although the country functioned again, the savings were never restored, nor were the values of hard work and decency that had accompanied the savings.There was a different temper in the country, a temper that Hitler would later exploit with diabolical talent. Thomas Mann wrote:"The market woman who without batting an eyelash demanded 100 million for an egg lost the capacity for surprise. And nothing that has happened since has been insane or cruel enough to surprise her."

With the currency went many of the lifetime plans of average citizens. It was the custom for the bride to bring some money to a marriage; many marriages were called off. Widows dependent on insurance found themselves destitute. People who had worked a lifetime found that their pensions would not buy one cup of coffee.Pearl Buck, the American writer who became famous for her novels of China, was in Germany in 1923. She wrote later: "The cities were still there, the houses not yet bombed and in ruins, but the victims were millions of people. They had lost their fortunes, their savings; they were dazed and inflation-shocked and did not understand how it had happened to them and who the foe was who had defeated them. Yet they had lost their self-assurance, their feeling that they themselves could be the masters of their own lives if only they worked hard enough; and lost, too, were the old values of morals, of ethics, of decency."

The death of the “US consumer”

The famous “US consumer” has been the driving force of the global economy for decades. This ends in 2010, as the dollar' s collapse will wipe out America' s purchasing power.

US Economic Disintegration

70% of the US economy is consumer spending, with at least 20% of it directly tied to commercial retail real estate. Less than 10% of our economy is related to the production of basic goods and services. This style of economy cannot handle a pull back in consumer spending.

America is facing a terrifying future. As the dollar loses most of its value, America' s savings will be wiped out. The US service economy will disintegrate as consumer spending in real terms (ie: gold or other stable currencies) drops like a rock, bringing unemployment to levels exceeding the great depression. Public health services/programs will be cut back, as individuals will have no savings/credit/income to pay for medical care.

What has already happened in the last year offers a good preview of what to expect in the next:

With the free falling dollar spreading doubt about all paper currencies, and countries with weak financial health will join the US in hyperinflation. Two countries which will follow the US into economic oblivion are Britain and Japan

Japan meanwhile is facing a demographic collapse and its debt to GDP is approaching 200%. The dollar' s collapse is going to wipe out the value of Japan's foreign reserves and destroy the country' s largest export market (the US), heavily damaging the economy. The yen, like the pound and dollar, will not survive.Financially Surviving 2010

Here is some investment advice for surviving the 2010 Food Crisis.

Avoid all commodity futures!

DO NOT BUY agricultural futures! While it might be tempting to buy futures contract for soybeans and other agricultural commodities, this is a mistake. Look at the backwardation which happened at the end of August this year: shortage sent cash price of soybeans over $13 while futures contracts hovered around $11. Futures contracts missed out on most of the price spike by nearly 25%.

The 2010 Food Crisis will send futures into permanent backwardation. In other words, shortages will send cash prices into steep backwardation, and then, when the dollar and treasuries collapse, defaults fears will cause that backwardation to grow. Fears that CME might collapse could easily lead futures to trade at a fraction of the commodities they track.

Avoid all other derivatives

It is impossible to hedge against the dollar' s fall with derivatives!Since global derivatives markets operate on the assumption of the continued stable value of the dollar and short term US debt, Using derivatives to bet against the dollar is NOT a good idea. The panic in 2010 will see the majority of derivatives end up worthless.

Avoid all US debt

The biggest buyers of US debt, foreign central banks, are about to become the biggest sellers. Get out while you still can!

Avoid all investments dependent on US consumer

The dollar' s collapse will rob US consumers of all purchasing power, and any investment depend on US consumption will lose most of its value.

Avoid investments in oil (at least for the next year)

While I am bullish on oil for the long term, there are several reasons to be underweight oil in the near term:

1) There is a supply glut (volumes of oil products stored at sea have risen to more than 90 million barrels.)2) The dollar' s collapse wipe out a huge amount of demand for oil. While demand from emerging economies like India and China will replace this lost demand, it will take in one to two years.3) Higher food prices will hurt demand for everything else, including oil.4) There is a very high the entire Strategic Petroleum Reserve will hit the market next year after the treasury market collapses and the US government is desperate for cash.

Investments in oil won' t be complete disaster as the dollar' s collapse will generate a lot of demand for “real” assets, but I expect oil to be the worst performing commodity in 2010.

Avoid Margin Accounts

If your broker fails, you are virtually guaranteed to be left with nothing.

Anything (non-derivative) related to agriculture is going to have a good year. The stocks of fertilizer and seed producers should do well for example.

The best investment in agriculture is to buy farmland in countries which don' t subsidies their agricultural sector (subsidies for their booming agriculture sector is the first thing cash-strapped governments will cut).

Commodities will have a great year next year as the dollar collapse. Agricultural commodities will be the best performing and oil will be the worst. Everything else should fall somewhere in between. Commodities not consumed in the US but heavily consumed in China, like coal, will do best.

Invest in service sector of emerging economies

America' s lost purchasing power will be transfer to nations exporting nations with large foreign reserves. Investments in the service sector of places like Russia, China, Brazil, India, etc should do well.

Invest in the debt of stable currencies

For the short term, I would stick with short term debt (in stable currencies) or, better yet, gold. However, after the 2010 Food Crisis begins, interests rates around the world will jump significantly in response to spiking food prices, and this will probably be a good opportunity to acquire long term bonds at attractive rates (in stable currencies like the yuan, ruble, etc).

Conclusion

There is no precedence for the panic and chaos that will occur next year. The global food supply/demand picture has NEVER been so out of balance. The 2010 food crisis will rearrange economic, financial, and political order of the world, and those who aren' t prepared will suffer terrible losses…

Very impressive summation - no wonder that it took extra time to put together. My question is, why are the leaders of the populous nations not already stockpiling food, knowing what is coming? They must know about all of this since there is no way that they would rely on phony US govt official data on food production any more than they do the equally phony economic data.

Well thought out analysis; it's an interesting take on what will cause the dominos to fall. It seems like everyone else is expecting some sort of sovereign debt default to kick off the next deflationary impulse.

Eric, I support your work, but don't you think a little modesty in your prognostication is called for, given that the food crisis was supposed to materialize in 2009? As such, I am not quite ready to "throw in the trash" any analysis that does not call for such a crisis in 2010.

This article flowed along quite nicely until you got to the recommendations, which started with "avoid commodities" then several more down you say "commodities should do quite well. Unless I'm misunderstanding something here, isn't this a contradiction???

you say you have moved to Russia, Wont that give very limited insight/information to what is actually is taking place here in the US as far as food goes? Not saying the crises wont hit, I think everyone should be prepared for what might be.if we lose the internet come 1st quarter (govt take over) as some have perdicted, you will be totally blind over there in russia...that would scare the crap out of me...

You called for the exact same catastrophe in 2009. What a waste of time. Your insight is completely skewed with your own personal neurosis and myopia, and the entire article is rife with grammatical errors that make me wonder how anyone could possibly take you seriously. This is not Germany of 1923 or Britain of 1947. The world is in financial turmoil and the US dollar may be done-for, but your prognostications are the same "the sky is falling" kind of crap that crackpots, mostly american crackpots, have been declaring to be imminent for decades. Buy gold, great. But build a bomb shelter and get the bbq ready for the neighbour's cat? God, who the hell do you think is going to buy all of china's goods if they suddenly decide to stop extending credit to us? God, everyone wants to keep betting on China, but China can only succeed WITH the United States, even if it means continuing to prop up a dollar and extend credit that won't ever get repaiod. Enjoy your gulash, comrade. Good riddens.

I don't get it. How can you pump China if you anticipate export bans on food crops? China is almost totally dependent on food imports to feed itself; it doesn't grow anywhere near enough to feed its immense population. If food stops moving across borders, a billion Chinese will starve, and the nation will be torn to shreds.

This comment is a bit of a plug, but I hope it will be allowed in the spirit in which it is written.

Although the coming food shortage may be unavoidable, the demand for more food production will grow. There are two ways to produce more volume yield: higher production from existing farmland, and clearing and planting more farmland. The operative words there are "volume yield".

There is another way to produce more real food; that is to produce the same volume with a higher level of nutrients, i.e. nutrient-dense food. The Green Revolution and extensive work with hybrids and GMO crops since the 1950s have given us a greater volume of food but a corresponding fall in the nutritional quality of that food. Has anyone not heard or read that our soils are mineral depleted and so is our food?

There is a pretty simple and relatively short-term solution to mineral depleted soils and crops: put the missing minerals back in the soil. I'm not talking about glacial rock dust, but rather a scientific analysis of the soil with an eye to nutrient minerals and then adding back to the soil the minerals that are needed; crops need a full complement of minerals in balance in order to make high levels of complete proteins, vitamins, and essential oils. It's actually quite easy to grow crops with two or more times as many essential nutrients as today's average crops. What this means is that a bushel of corn or beans can feed twice as many people or animals; it is not volume that makes nutrition, it is nutrient density.

I saw this clearly back in 1999 and spent eight years studying and experimenting to find out which minerals were needed in the soil in what quantities to produce truly healthy nutrient dense food. Two years ago I put up a web site to share my findings, http://www.soilminerals.com. It has many pages of info on soil minerals and how and why to get them into the soil, all free. There is also a book that I sell that will teach anyone who can do fifth-grade arithmetic how to read a soil test and amend any soil, no matter how poor or worn out, so that it can grow the highest quality, disease and insect free, nutrient-dense crops. One doesn't need to buy the book; the essentials are all there on the web site. This is important info. Whether one is growing a backyard garden in suburbia or has a thousand acres of black topsoil in Russia, knowing the ideal mineral balance and how to get there using natural mineral resources is the key.

you people who don't think there will be a major food crisis are fools!

In a perfect world, one without secret society control, with today's modern farming technology, there could be little problem feeding the world's population.

However, this "crisis" we will see will be delivered to us on a silver platter, along with a mutated swine flu(already in ukraine) and total collapse of the banking institutions.

This is all a planned event so yes, many people around the world will starve, particularly americans, whom will have lost their currency as well.

So keep up the good work, Eric. Thanks for helping us think on our own and screw the gov't. They have not and forever will not be on the side of the people. They exist only on the backs of the taxpayers, promising security and infrastructure. Unfortunately, the only thing they do is steal everything from the people over the generations, putting most of them to sleep with their controlled media.

We are all slaves in their debt!

But one thing you may regret Eric is the fact that you're going to miss some pretty good fights here. Texas is talking about secession. Other states will follow. There will be some pretty intense battles in the not so distant future.

How was the immigration process to Moscow by the way? Difficult or not so bad?

Forget buying gold or silver. The best investment is canned food. Keep it for the nxt 3 yrs & not have to pay 2012 prices. Canned commodities are more valuable than gold/silver.

If you want to read an exciting book on what's going to happen in America, then read this books. It's the 2nd American Revolution. It's Americans, in a small town, that stands up to federal tyranny. Could be ur home or mine.

I have been predicting massive food shortages since the 1990's. Long term agricultural monopolization of commodity buyers have brought us to this point. Farmer do not receive fair prices for their crops and labor.

In addition a collapse of the dollar will make oil importation into the USA impossible. If farmers manage to plant another crop there may be no gasoline to run the harvest machinery.

Eric, there's some good research in there but the overblown hysterical claims tend to make you lose credibility with objective readers and non-conspiracy theorists. Food and water are vital issues and they will affect many lives. However most individual investors have generally lost money trying to play counter trends in depreciating assets like commodities. There are opportunities but the successful execution of an investment proection strategy is nowhere near as simple as many people will assume from reading this piece. I fear that this well-intentioned and well-researched article will do more harm than good

If I may. When our forefathers sought to rid themselves of the oppressive yolk, from King George, they refused to buy anything. Why? Everything they bought had to be bought from England. This was an early form of fascism. So in turn they spun their own wool, baked their own bread, from their own wheat. If Americans went back to this very simple economic principle to brake the master's backs, it would be but a mere 5 to 10 years before we would gain our Independence once again. I have begun the revolution quietly, in the name of frugality, making my own items from scraps...have you?

I don't see Canada mentioned at all through your report or did I miss something? Canada produces a lot of agricultural produce for world export and I know that over the last year we have had a lot of weird weather but I have heard nothing here about shortages next year. Is this information being kept from the Canadian population as well do you think?

What I don't understand is this: What does the USDA's estimate of production have to do with anything? Aren't producer's prices determined by actual supply versus demand? I guess what I'm saying is that if there is a shortage now, surely the producers and buyers know about it and prices should have gone up.

You have touched upon several interesting complexities in the food shortage scenario you have postulated. First, it is important to remember that the U.S. was the largest oil EXPORTER in the world until the 1990's. Our oil production has not actually dropped that much since then, but our consumption has nearly doubled due to our increasing lifestyle, causing us to import about 1/3 of the oil we use. Agrrculture has traditionally only used about a third of the oil we consume, this includes the food delivery stream and pesticides and fertilizers. With this in mind, the agricultural aspect of the U.S. can re-adjust itself rather quickly by diverting oil to food production. It is also important to realize that we EXPORT about a third of all of our agricultural products, so if there is a short-fall in production, this will only effect the ability to export the corn and beans...it will not affect availability on the shelves of the U.S. food stores. So in raw materials, the supply stream and adequate crop yeilds, I believe that the U.S. will COULD be fine...but I also realize that we will not be, because of all of the other short-sighted factors weighing against us. I do not for a moment minimize the fact that Con-agra and Monsanto own 95% of the food production in the U.S. and they force the USDA to subsidize the crops resulting in an artificial value. I do not for a moment forget that the money stream is so incredibly corrupt and greed based, that most of what we as American citizens (that would be U.S., Canada and Mexico) have based our identities and life-styles around have been sold to us as packaged goods rather than WE THE PEOPLE making informed decisions regarding how we conduct our lives. We have allowed ourselves to become dependent upon foreign oil imports, supper fast food, hyper-subsidized crops, dairy and meats, mutipule cars, and tv's and gadets. So now, if the food chain becomes inflated and the dollar devalues...we need to take a good long look at ourselves. We made these things happen. If these draconian things happen, WE THE PEOPLE will also need to become leaders instead of followers...we will need to demand that our very adequate oil production feeds us. FEEDS US, not the world. And We need to demand that we are part of the food supply chain, not just end-users. We will need to prop-up the dollar by making it OUR dollar. My thoughts, David

A record harvest is certainly not achievable when you consider the collapse in fertilizer prices which suggests the credit crunch had a obliterating effect on the demand for fertilizer. Farmers scrimped from Madra Pradesh to Western Australia. I am a farmer who invests in fertilizer stocks to hedge my cost base. The unprecedented drop in fertilizer use in 2009 is confirmed by the massive drop in earning reported by fertilizer companies around the globe. There is a lot of BS flying about the size of global crops at the moment. Many farmers I talk to are very suspiscious.

Just look at the earnings of fertilizer companies worldover for 2009. Farmers scrimped big time on fertilizer. There is no way we have a large harvest coming out of 2009. I'm a farmer and I have been smelling a rat for a number of months now. Many of my farmer mates are also scepticle. You don't have big crops when you don't fertilizer accordingly.

Matt, the USDA estimate is kinda like the daily racing forms. Investors (gamblers) base their bets (investments) on the information in the racing form. If any of the information is skewed (jockey weight, etc.) then investor's decisions on what to bet and where to bet will also be skewed.

Since the gambling sheet for crops is produced by a government agency (the USDA), if people stop believing in the accuracy of that sheet, it will have a ripple effect throughout the entire government.

You keep referring to adverse weather conditions affecting wheat harvests around the world. One more thing we need to keep track of is the spread of the Ug99 variant of wheat "stem rust" fungus. To quote this article from the LA Times (A 'time bomb' for world wheat crop):

The International Maize and Wheat Improvement Center in Mexico estimates that 19% of the world's wheat, which provides food for 1 billion people in Asia and Africa, is in imminent danger. American plant breeders say $10 billion worth of wheat would be destroyed if the fungus suddenly made its way to U.S. fields.

riverdale said... "God, who the hell do you think is going to buy all of china's goods if they suddenly decide to stop extending credit to us? God, everyone wants to keep betting on China, but China can only succeed WITH the United States, even if it means continuing to prop up a dollar and extend credit that won't ever get repaiod. Enjoy your gulash, comrade. Good riddens.

I can never understand this way of thinking. Why wouldn't the Chinese be able to make use of the things they sell to us? How are they so different from us?

I feel your article was interesting and useful. However I am not sure about the conclusions.

I have been anticipating food shortages for some time around the world due to Dollar crash. Not the other way around.

I have not heard about the actual food shortage due to weather patterns. If true as you point out, then world is in a lot of trouble.

However in your conclusion you said rich countries will reduce subsidies when they are in financial trouble. I have to disagree. Any country and all countries including India have always increased subsidies for food production at all times and especially when food shortages are predicted. When it actually happens as you predict I am sure the US Govt will act much more urgently and effectively.

I don't trust Governments and I live a peasant life in Indonesia because of that. I have my own farm. But I know the Government will come to support food production. one way or the other.

Russia is in a unique BAD situation. It imports more then 80% of its food products. Almost all their food today are distributed by chains like "Perikristok", "AUSHAN",etc which are basically western companies.

If you are living in Moscow. You have a very good chance of getting caught in the middle between the western Bankers & Russian Government which are engaging in a real silent cold financial war.

I expect soon for that war to come to the fore where western world will stop supplying the food products to Russia.

Russia, as you correctly pointed out uses very little fertilizer because it has stopped farming activities for a very long time. Its revival is planned in southern regions but as I see it not very successful.

I know so much because my wife is a Russian from a rural region outside Moscow.

I can tell you Russia is not a safe place to be at the moment.

I can agree that farming in southern Russia is a good potential business. But again western companies have already started buying up the good lands in the south. But I know that Russian Government will not sit idly by and will find some ways to control it. Again another situation where Western Banker - Russian Govt will not see eye to eye. I am not going to wait to find out who wins.

As you again correctly said America produces around 30 to 40% of major world crops. Why should America be in trouble while they also print the US$ in which it is purchased?

Well on the 'Troll Effect' seen through the comments with the attack the messenger tide one can clearly see the need to carefully understand the content posted here. A child can see the coming problems because of the systems fragility. Can you naysayers logically refute the view that the system is INTENTIONALLY been put into collapse mode by elite money interests using many tricks I.E. GMO,Factory farming,fuel from food crops and so many other destructive anti-sustainable farming practices? I have been waiting for the 'Perfect Storm' for some time now and one serious failure of the systemic fragility that is our North American system of food production is all the whole weakened banking and power system needs to topple. We have been set up over many decades to arrive at this point. We all {Urban living folk} have a tune up coming. The wheels WILL come off our machine. All that don't happen to notice the machine is moving a 165 mile per hour will be the most surprised at the impact of the departing wheels and sudden mess of that departure. The elite need SERIOUS CHAOS to grab you all by the balls once and for all. They will find this a fools path. Agrarian living IS going to return to North America. Harvesting crops BY HAND is done All over the world, This world of soft,complacent consumerism IS going to end. Oil is dead... Sooner or later. The Car is DEAD... it is just a matter of how many buy it before it is buried. Stupid tractors... Toast! Turning soil with a hoe IS coming. Hundreds of workers plowing and seeding fields JUST TO AVOID DEATH is coming. Work or Death. Sucks but it is true. The soft life is OVER. It is just a matter of time and death. Not one troll can stop this coming Perfect Storm the banksters have unleashed upon humanity... And it will be their undoing without a doubt. Work is LIFE and Working for LIFE IS OUR SALVATION! They cannot work anymore than the can be kind and generous. They will be the losers thinking They run this world. God will have his say like it or not. Good luck. Work hard... And DO LIFE!

I was reading some mining magazines at the Menlo Park USGS and noticed and article on the Potash miners.Basically the Potash miners jacked up the price of Potash last year, and the quantities purchases declined drastically. There were some excuses like a railroad line collapsed into a sinkhole in Russia, etc.But the price didn't go up because of lack of supply, it went up because the small number of Potash miners jacked up the price and restricted delivery.You can do that one year and get away with it. The second year crop yields go way down.So this rather hysterical article has some truth behind it.

As I said before, forget gold & silver buy canned food now & eat it 3 years frm now. That way, you eat today's food prices 3 yrs from now & don't have to pay capital gains then when inflation hits 40% over the nxt 3 yrs.

If martial law or revolution happens in the nxt 3 yrs., you'll have your stock of food while others starve.

Also, read that new book just out that's about the 2nd American Revolution & how a small town stands up to federal tyranny. I've been giving it to my friends..it's that good. It could be your town.http://www.booksbyoliver.com

i am surprised that nobody seems to have a clue as to how the govt is changing the weather with their chemtrail spraying. Anchorage Alaska is usually sunny all summer long, 75-90% cloudless blue skies, desert climate. yet the past few years, there has not been a single sunny day. they spray all day, every day, and it then becomes completely overcast. every day. it is changing the weather, climate, and it isn't just happening here. i check with friends across Canada (BC) and the US (MW, SE), and it is happening there too.

they are not spraying us with the USRDA of Vitamins & Minerals. they are not spraying oxygen. if it was anything good, the govt would be only too proud to propagandize positively about it. whatever they are spraying is no good, and the public's outrage about it. is far less than is warranted.

all of us are breathing it, all of us are eating it, and drinking it, whatever it is. in the least, it is a sign that there are people that think that own everything (the atmosphere), and can control everything (the climate/weather), and can do whatever the hell they want (spray us all). it's outrageous.

Regardless of the different opinions about this excellent article I would strongly suggest building a stock reserve of non-perishables. My grandfather who survived the great depression always saved for a rainy day.

Looks like cognitive dissonance is running rampant. THERE IS NO NATURALLY OCCURRING FOOD SHORTAGE. Hello?

Its all part of the control needed over this big of an ARMED POPULATION, WITHOUT FIRING A SHOT OR THEY LOSE.

If you knew the scope and breadth of this agenda, you would be shocked and if we don't wake up pretty damn soon, it will be too late and many posting on here will be dead. Sorry, but that is the the hard core, brutal truth of it.

You think Bush and Obama were accidents? No, they were handpicked puppets to bring this agenda that has been in the works in reality for over 59 years and now its hammer time, over the next two years and they are now well covered with our bailout and their seed bank in the Arctic.

WE HAVE TO RID THIS COUNTRY OF THESE FEW PSYCHOS AND DO IT NOW... LIKE ARGENTINA AND ICELAND DID OR WE ARE DOOMED. KICK OUT ALL WALL STREET BANKERS, FOREIGN LOBBYISTS, FOREIGN DUAL CITIZENS RUNNING OUR GOV FROM POSITIONS OF POWER and we will save ourselves.

To do that means we have to acknowledge the real problem and the planning that has gone into it and by whom.

are there any farmers that read this site? we are piling grain on the ground because there is not enough inside storage for the bounty given all the challenges and political disaster declarations. WE HAVE PLENTY OF GRAIN! although the grain futures traded higher today the long term trend for grain prices IS DOWN,ACROSS THE BOARD.i am all for stockpiling canned goods junk silver and buying some gold for when govts get more stupid(could that be possible in the usa). but one thing i am certain of is that WE WILL NOT RUN OUT GRAIN! farmer dabba, somewhere in iowa. ps never bet against the american farmer. we will get it done

CHINA will BUY their own goods and their new middle class will compare to the old USSA middle class.CHINA will do just fine,after all their customers of USSA enemies will happily fill the gap.,as they enjoy watching USSA fall on it's face.(IE IRAN ARAB NATIONS VENEZUELA ECUADOR,ALL SOUTH AMERICAN COUNTRIES,USW.)THE COUP ACCOMPLI and the imminent decline of the dumbed down duped propaganda worshippers,will be unprecedented.Self absorbed America the entitled may be in for a dose of what the rest of and most of the planet has had to endure,for the majority of their lives.LACK OF FOOD, LACK OF WATER,REFUGEE LIFESTYLES.Violence and danger and exploitation.THOSE WHO LIVE BY THE SWORD!

ILA it's not a question of if China can make up for the lost consumption from abroad with their own domestic consumption(because they definitely can with their larger population), it's really not even a question if they are currently making up for that lost consumption because with the rise in prices it's evident that they are. The question is if they will choose to surpass the amount of consumption lost from around the world with domestic consumption and a more radical question is if they will stop exporting to the rest of the world in order to have that increased consumption without destroying it's own currency? In other words will it destroy the dollar in order for it to have that mass consumption without stoking hyperinflation in their currency? I still don't see a reason for China to choose domestic consumption over foreign consumption. It makes no difference to China who is consuming China's products, whether domestic or foreign but I see no incentive to just flat out cut out the US consumer and replace them with domestic consumers. As long as they have the US consumers, no matter how small, it's still consumption and that's all that matters. Maybe if consumption from US drops below consumption from China, then maybe then China may think of cutting off exports to US but it seems right now that US is in control. What ever US is demanding from China, China is delivering, even if those demands are shrinking, it's the US controlling the shrinking in the exports from China not China. China isn't choosing to export less, the US is choosing to import less meaning the US is in control and that means that supply is keeping up with demand. It is when China chooses to export less while we choose to import more that we will see demand outpacing supply and extremely rising prices. But I don't see China doing this. I see China just continuing to go on making up for lost consumption from the rest of the world with their own domestic consumption but at the same time being careful not to create more consumption than was lost. What would cause China to choose to consume more than was lost from consumption around the world is the question. I personally see no reason for China to consume more than the consumption that was lost from around the world. Thus keeping prices steady since supply would be keeping up with demand. I think the extra consumption in China is just to create service sector jobs to pacify those who lost their jobs in exporting at least until this recession in the US blows over. Then we may see the balance shift back to the way it was. China will decrease consumption when consumption returns in the US. There's no reason to believe that they won't maintain the balance of consumption for ever how long it takes.

If there is one reason consumption in China may surpass the consumption that was lost by the recession is that China was already a poor begger country and now with the lost export jobs, that force to push for reform and more consumer loans and welfare in China may have grown stronger, especially with the college graduates also entering the job field. So it's that force that may have pushed officials to implement these growth programs in China and it may push them to implement more growth than was taken away from the rest of the world due to the recession. So in that way China may create more consumption than was lost from the rest of the world. Same goes for other countries in the same position as China.

Am I the only one who thinks the "disaster area" declarations are the actual data that's skewed? If you surmise that actual crop production numbers are skewed because the number of disaster areas was higher than ever, would it not stand to reason that fraud occurred in naming these disaster areas? After all, naming a disaster area after a storm calls in free government aid... there are many reasons to declare a disaster area, even when one didn't actually occur.

I know from farms here in Indiana that we didn't have a great growing season, but crops DID produce remarkably high yields, despite the bad weather. So maybe the USDA production data is correct, and the disaster area data skewed. That changes everything.

Stibot that article seemed to be contradicting itself every other sentence. On top of that there is a difference between "not allowing the Yuan to appreciate" and "depreciating the Yuan to record levels". The former suggests that China will not follow the US in contracting credit because it is the expansion and contraction of credit that determines the value of the currency, not the amount that is printed. The latter suggests that China will create more consumption than was lost from the rest of the world due to the recession. In other words, the former suggests that China will make up for the lost consumption with it's own domestic consumption and the latter suggests that China will more than make up for consumption by expanding credit large enough to cause China to consume more than the consumption that was lost from the rest of the world.

I also don't agree with this statement: "The yuan has fallen against the currencies of most of its trading partners this year because it has been fixed to a weakening dollar" . The dollar isn't causing the Yuan to weaken, it's the other way round, the Yuan is causing the dollar to weaken. All you have to do is look at which one is expanding credit and which one is contracting credit to know that. When credit is expanded that puts more of the currency in circulation and since the Yuan is pegged to the dollar, the dollar will experience about 6 times the weakness the Yuan will experience being that the peg is around 6 Yuan for every $1. All the forces coming from the US are deflationary, while the forces coming from China are inflationary. Because inflation and deflation is based on expansion and contraction of credit.

On a related note I don't know what this talk of a dollar carry trade is about. Do commercial banks in other nations use the Federal Reserve Notes as reserves for their expansion of credit? These foreign nations aren't making loans with US dollars, they are making it with their own currency, so if there is any reserve requirement it must be in their own currency not the US dollar. So I don't understand when people like Nouriel Roubini talk about foreign nations borrowing from the Fed and 0% interest rate like US banks do and then unlike US banks are currently doing, those foreign banks make loans based on that liquidity. Is this reaching or what. It seems no matter what, they will find a way to blame the US for the depreciation of the US dollar even though all the forces coming from US are deflationary. I mean maybe I don't understand the whole carry trade business, there was the Yen Carry trade back in the day and probably still now but I never really understood it. Are foreign commercial banks really borrowing from these Central Banks? And for what reason? What do foreign commercial banks need with Federal Reserve Notes? Do US commercial banks need foreign currency? Does your bank on the corner need foreign currency? No, so why would foreign commercial banks need Federal Reserve Notes? I don't believe in the whole carry trade mess. People just refuse to accept that these other nations can also create their own money in which to invest and consume just like the US did during the boom. Everyone is stuck on the false idea that without exports, these nations stock market would crash as if they can not consume themselves. The talk about how wages are not high enough, do these people ever think to look at US wages, they remained stagnant during the boom. Wages have little to do with the boom because the boom is created by credit. It's ridiculous how a nation that was issuing NINJA loans to create the boom can say that a nation with low wages can't grow. As if consumer credit is a tool only US has access to.

Anyway the point is that it is possible for China to grow larger than the US ever did but the question is if they will choose to grow that large. As I said doing so while maintaining the peg and continuing to export will destroy both the dollar and their currency. The only way it is achievable without destroying their currency is if they destroy the dollar by depegging and discontinuing exports to US and around the world for that matter. I see no incentive for China to choose it's consumers over US consumers so there's no reason China will cut off US consumers and replace them with Chinese consumers, even though it is easily possible for them to do so. All China will do is replace the consumption that was lost. The fact that some prices are rising higher than when consumption began to decline only means that they are having a little trouble finding a balance but the discrepency won't be much for long as they have no incentive in creating more consumption than was lost. That's just the way that I see it.

Well, this can join the ranks of all the other doomsday prophecies, like the Millenium Bug, of which nothing came...but DID have all the media hysteria and irresponsible reporting...Extrapolating graphs and markets is not a proper scientific analysis, and forecasting the "end of food" based on transient weather conditions is equally as flawed.In other words we have conjecture, secret government plots, speculation and theory but no established irrefutable facts.First we had climategate, now foodgate ?

So, how does moving to Russia somehow save anyone ? Is Russia immune to global economic factors or to weather changes or anything else ?Looking out for #1 would mean that if such a crisis actually occured, then the USA would logically switch from exporting to domestic consumption to save the starving masses, out of absolute necessity !Reduced food availability and consumption ? Well, that should do wonders for the average obese citizen !Switching to potatoes as a staple crop would be a better choice due to the high nutritional profile. One could live off those easily, unlike soybeans..Roll on 2010 and let reality do its worst.

But what China's unwillingness to allow the Yuan to appreciate is telling me is that there is a force by the people pushing the govt. and banks to continue to do things to increase domestic consumption. So even though we don't know if China will choose to increase it's consumption to more than was lost from consumption from around the world, we can be sure that the decrease in consumption has a limit. Meaning China will continue to make up for lost consumption from around the world even if it doesn't exceed that consumption. So in a way, that puts a floor on prices. Using that information, you can know to buy on the dips because there is only so low China will allow the prices to drop.

There is little question in my mind that a food crisis is looming, soon whethe or not in 2010, caused by (1) peaking and perhaps reduction of global grain production, (2) increased demand for beef in China particlarly, causing decreased avakilabilikty of grain and land that can be used for grain, (3) diversion of grain and the land grain could be produced on for biofuels production, (4) widespread droughts and other anomalies such as those you describe for the Midwest, and (5) relentless population increase, and (6)peak oil, which is going to take its toll on the "green revolution," particularly in the Third World as illustrated by your raph of fertilizer use. You've produced a careful and convincing summary of the situation.

In arriving at an overall number to measure the severity of the 2010 shortfall, however, you appear to rely upon a 30% drop in "value" of at least one crop in numerous Midwestern counties, with an overall loss of 30% in crop "production" in those counties. You say:

"Specifically, the USDA has declared half the counties in the Midwest to be primary disaster areas, including 274 counties in the last 30 days alone. These designations are based on the criteria of a minimum of 30 percent loss in the value of at least one crop in the county. - - -The same USDA that is predicting record harvests is also declaring disaster areas across half the Midwest because of catastrophic crop losses! To eliminate any doubt that this might be an innocent mistake, the USDA is even predicting record soybean harvests in the same states - - - where it has declared virtually all counties to have experienced 30 percent production losses."

What I find confusing in the above statement is how or whether or why a 30% drop in the "value" of one crop should be equated with an overall 30% drop in food crop "production."

- A drop in "value" is not necessarily a drop, let alone an equivalent drop, in "production."

- A drop for one crop is not necessarily a drop, let alone an eqivalent drop, for crops generally.

- A "crop" is not necessarily a food crop.

Am I missing something?

You have performed a valuable sevice in reminding the public of the looming food crisis, all too likely to put the coup de grace on the world economic crisis. Perhaps it would be even more valuable with the above clarification.

well eric Im sure we both hope that you've made a mistake and that "it" won't happen - but I don't see any defects in your argument, except that oil supplies are always uncertain and thing as you describe them may be worse, if oil's disrupted by the violent policies we see being pursued. we bought a little ranch/farm years ago with the expectation of trouble.

I am ignorant on economics. Is there going to be a mass food shortage, skyrocketing prices, mass starvation, and food fights in America in 2010? It sounds like a doomsday scenario. I wonder who is making money on this. I do not know. Does anyone know for sure?

Your article is interesting and backed up by some fairly compelling info. I'm not sure about your conclusions, however, since some of your reader responses seemed to indicate that you predicted the same thing LAST year. Still, it's good reading and worth taking time to stock up on some food and other essentials.

One major sticking point for me was all the spelling and grammatical errors.

If you aren't going to use an editor, at least spend time proof-reading your own stuff. Lots of errors in an article give the impression that the writer is uneducated and not to be taken seriously.

Rev 6:6 And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine. GET READY ERIC IS RIGHT ON. (A PENNY IS ABOUT $30.00 HOSS and A MEASURE AIN'T MUCH)

RIGHT ON THE HEEL OF FAMINE IS THE PALE HORSE AND IT IS STARTING TO RIDE HARD NOW AND GOES WITH FAMINE. (PALE IS GREEN-YOU FIGURE IT OUT).

Rev 6:8 And I looked, and behold a pale horse: and his name that sat on him was Death, and Hell followed with him. And power was given unto them over the fourth part of the earth, to kill with sword, and with hunger, and with death, and with the beasts of the earth.

Rev 6:9 And when he had opened the fifth seal, I saw under the altar the souls of them that were slain for the word of God, and for the testimony which they held:

THIS WILL BRING FINAL AND LASTING JUDGEMENT ON ALL MEN...THE BLOOD OF GOOD MEN.

So you naysayers who have no idea what is going on and your pot of gold at the end of the rainbow prognostications will all fail...you know the saying 'gain the world lose your...

SORRY BUT YOU GOT TO CALL THEM AS YOU SEE THEM. THERE IS NONE SO BLIND AS THEM WHO CANNOT SEE. BUT I'M SURE THE ACLU WOULD OBJECT TO THIS POST! God-Jesus-Prayer spit..spit THE AVERAGE RUSSIAN KNOWS WHAT IS GOING ON FROM EXPERIENCE and BUBBA IT HURTS.

A lot of information, too much to digest at first glance, but the intro talks about bankrupt Chrysler, Ford, and GM. I wonder why I can still buy their products if they are bankrupt?And if they are not bankrupt, that puts the believability of this article in a different light.

I would think that in a widespread food shortage market forces would divert gobs of corn and grain away from the beefs and chickens and towards direct human consumption, substantially mitigating the situation. Hey, maybe PETA's behind this whole thing?!?!

Seriously though, anybody know how much could be gained, calorie-wise, if meat became too expensive for most and what used to be destined for animal feed became available for human consumption? I bet its substantial.

This is the time to purchase Heirloom Non-GMO seeds from at least 3 different companies. This ensures that if for some reason someone fools you and sells you GMO seeds, you'll have better chances with 3 tries.

Also, stock up on silver coins while they are still severely underpriced, because once investors and mainstream realize that the world is running out of silver reserves, Silver's price will shoot up.

I recommend the pre 1965 us silver coins, they're cheaper than other type of silver, convenient, and inconspicuous in appearance.

This is all nothing but a bunch of bullshit. There will be no crisis. I own a pig farm and can not sell my pigs at any price! No one wants to buy them. This is not a food shortage crisis, it is a food abundance crisis.

Wer, you are right, the idea is to INSTILL FEAR in the general population, thus a feeling of helplessness and a need for "gubermint" to take care of us.

Then once that is done, we become slaves for them just to meet our basic survival needs. Its already happening, but slowly and unnoticed since fear is fed to us to not pay attention to what the real agenda is.

Control.... absolutely and unmitigated control over a very large population. Do some research and you will see.

This article turns on a conspiracy theory: that the USDA, afraid of higher prices, is willing to delay them by a few months by producing false numbers- even when accurate numbers, and rising prices, would reduce the dislocation caused by shortages.

How would participation in such a conspiracy benefit USDA managers?

Wouldn't getting it so massively wrong be a rather career-limiting move?

What if their numbers actually reflect a different scenario: that farming is very complex, forecasting is very complex, and anecdotal evidence, though interesting, is not a substitute for methodologies that incorporate tens of thousands of data sources, decades of experience, and supercomputer models of crop yields?

Looks like the author's research on how the USDA was over-estimating 2009 crop production -- which would lead to 2010 food shortages, financial collapse and government takeovers among other drastic outcomes -- is completely overblown. Yesterday, the USDA released statistics on the final output of 2009 corn and soybean production. Turns out their estimates were actually a little below the actuals. Makes one question the credibility of this research and wonder what the author has as an ulterior motive (hmmm - how much is he invested in gold anyway??)

WASHINGTON, Jan. 12, 2010 – U.S. farmers produced the largest corn and soybean crops on record in 2009, according to the Crop Production 2009 Summary released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS).

Corn production is 13.2 billion bushels, 1 percent above the previous record of 13 billion bushels set in 2007, and 9 percent higher than 2008. Corn yields reached an all-time high in 2009 at 165.2 bushels per acre, eclipsing the previous record of 160.3 bushels per acre set in 2004. Planted area, at 86.5 million acres, is the second highest since 1949, behind 2007’s 93.5 million acres.

The 2009 soybean crop broke records for planted and harvested area as well as for yield and production. Soybean production totaled 3.36 billion bushels, up 13 percent from 2008 and up 5 percent from the previous record set in 2006. The average yield per acre is 44 bushels, up .9 bushels from the previous record set in 2005. Farmers nationwide planted a total of 77.5 million soybean acres and harvested 76.4 million acres in 2009, both up 2 percent from the previous record set last year.

The overwhealming evidence points to a coming food shortage, as there is just too much factual evidence to deny. To those who think that a grain shortage just can't happen in the USA, just research the available first hand accounts of farmers from acroos the nation. They are seeing damaging weather paterns unheard of in their lifetimes. So yes, a shortage can occur. I have been wondering how we've made it as far as we have without people seeing what is going on.

the vast ammount of evidence points to some kind of coming food shortage. if you look at all the data as a whole, the arrival of a "perfect storm" of conditions has come into the picture. weather conditions that only happen once in a lifetime, Economic conditions unheard of since the first depression. Common sense says that something bad is coming. If I have to be wrong, I'd rather err on the side of caution.

What I find so intangible with prognostication and forecasting is the very slow creeping nature of something very large unwinding. It's hard to feel the edges looming and caving in.

I am not adept at reading the futures or commodity markets and how the prices there would indicate such happenings. So I look around me....

Can I see it happening where I am living? No.

Am I seeing serious rising prices? No.

If there is a crisis, when does it manifest itself publicaly and openly and covertly? I am finding the same consternation and confusion trying to understand the heath of the current financial world. Is it a huge denial or is it actually 'business as usual'?

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I can pronounce everything in our food now. I bake all our own bread, but I can't grow the wheat. We struggle to buy nutritional food while our stores are full of "convenience food" I can only remember a hindu saying:"Painted cakes do not satisfy hunger." Feed each other, Konchok Dondrup Sangpo.tymothythetall@yahoo.com

the bankruptcy of the major auto manufacturers (General Motors, Ford, and Chrysler), etc…

As you know, Ford didn't file bankruptcy and is the only one of the "Big 3" that is back in the black and doing well. If you can't even get a small point such as this correct, why should we believe anything else you write?

Look, I believe we are headed to a major financial crisis, but the problem with getting food will be because of inflation more than anything else.

Frankly, I agree with you that there are major problems facing this world, but when your research appears to be amateurish, people aren't going to pay attention.

Blogs like this one have excellent detailed information on agriculture and weather, and I am using them to stock up on items before they get too expensive. For example, I read weeks ago that there were problems with sugar crops in several countries. Sure enough the price of a bag of sugar has gone up about 30% and I have seen price rises in products that use sugar. Now I'm reading that the coffee plantations in South America are being severely affected by drought.

If you think global warming is a hoax, you'd better reconsider. Temperatures in South America are ONLY half a percent higher now, and the plantation owners are trying to figure out how to move higher up into the mountains where it's cooler. It's not possible to dig up mature trees and move them, you have to start over with saplings. I'd say to start buying up coffee in cans right now.

This blog and others like it have very good information on agriculture and weather, and I use it to decide what to stock up on. For example, there were warnings about sugar crops. Sure enough, the price of a bag of sugar has gone up by 30%. But I bought about 30 lbs before it did.

Now I'm reading that coffee is in trouble. For those who think global warming is a hoax, think again. In South America the average temperature is now half a degree warmer--ONLY half a degree--and the result is more drought and the coffee trees are withering. The plantation owners are trying to figure out how to move higher up into the mountains, where it's cooler. But you can't just dig up and move mature trees; you have to start over with saplings. So be prepared for coffee prices to shoot up.

And the the people who think the previous warnings are bunk--well, you haven't gone shopping for a long time. Last year the price of pet food went up 40% and it's still rising. I can still afford chicken, but I haven't been able to eat a lamp chop in years.

Good Luck, Eric. Better to be prepared too early than too late, or not at all!

The most obvious result of the food situation is that mankind will continue to be fed on inferior foods. All sorts of factory contrived substances will be dished up as food for the masses. Beware of cheap food.

Good food is going to waste because people don't value it.

Real butter gets specialed at my supermarket, yet like honey and rice, it is one of the best value products there.

Just as people have grown ignorant of the difference between pure gold, coin grade, debased, rollled, burnished and electroplated, so have they been dumbed down about the quality of foods.

Grass is one of the best foods there is, yet the most neglected.

Eric, I would love to see you research and write an article on the honey situation, especially as it has been treated the same as gold has been treated over the past hundred or so years.

The production, consumption and culture of using honey in Russia and the old USSR as well, is still not known to me and I find little on the web about this.

How did honey production fare under the communist's system? Did it go underground? Did the collective farms prove productive of honey? Were there any surpluses created, or was it in a permanent state of shortage, just as it was and is in the West, owing to having to compete with contrived and artificial sweeteners?

I gather Russians as a population value honey highly, but how is this playing out in the marketplace? Everybody in the West say they love honey too, but few of them bother to buy real honey compared to how much junk sweeteners they buy.

Dismiss the complaints about a few typos, Eric. The people who have the luxury of secretaries, proof readers and research assistants are usually underpinned by the system. They would be sorely tested to match it with you were they to be left to do it alone as you probably do.

I consider that if I didn't upset someone somewhere, then I didn't say very much!

That is a very clear analysis of the USDA estimate versus reality issue.

We left the economy in 1999. Rural land, solar power, deep wells, rain catch cisterns, springs, 7 years of food storage, no debt, no real income--everything is invested back into technology, supplies, food, and trade goods. We grow most of our own food indoors and outdoors, and look like we operate a truck patch.

I hope not too many people head our way looking for the security they failed to provide for themselves. Everybody who is at risk, poor or middle class or rich, should go vegan, grow food any way you can, stop the rampant consumerism. Even though our philosophy is go vegan, there's nothing wrong with fishing your own streams if they aren't too polluted, or trapping some squirrels, or shooting some deer if you must have meat.

We live in an unsustainable consumer driven dream world where most folks are in the crowd of lemmings headed over the cliff. We've burrowed into a quiet spot in Missouri where 65% of the water reserves dwell underneath us, and the population of cities is several hours a way.

Although the analysis was interesting and provocative, events have proven it to be demonstrably false. For example, actual crop yields for 2009 as reported in March, 2010, came in higher than the estimates which the author had severely criticized as overly optimistic and unsupportable in light of numerous crop disaster reports he had cited. Are the actual numbers bogus as well? The author also indicated that the U.S. would essentially run out of soybeans as of March/April, resulting in severe backwardation in terms of pricing. This has not happened because ample supplies are available. In view of the foregoing, I believe the author has a lot of explaining to do.

This article argues that in 2010, the WORLD will face a food crisis that will shake it from its roots. While I do agree that something is wrong in agricultural market (or a better way to put it, in the supply chain), I find myself unconvinced by the radical statements that predict the collapse of the agriculture and together with it, a wave of unseen hunger. I also consider that the solution proposed of ‘increasing food prices in order to cut overconsumption and avoid food shortages’ is unreasonable and it will only deepen the hunger and poverty around the world because many developing countries heavily depend on food imports.

We are in the fifth month of the year and the world does not seem to ‘run out of food’. According to the International Grains Council (http://www.igc.int/en/grainsupdate/igcsd.aspx), the supply and demand in agricultural markets did not go badly out of balance. The consumption of wheat and maize, for instance, was within the production level in 2009 and the world has not experienced a ‘catastrophic’ fall in food production. Articles such as this stir panic in the international market and favor speculative gains from increased food prices. As Olivier De Schutter, the UN's special rapporteur on the right to food states in an interview with EurActiv (http://www.euractiv.com/en/cap/world-set-new-food-crisis-2010-un-warns/article-187695), the 2007-2008 crisis was not the consequence of insufficient food production but of speculation.

This brings me to the core of the problem. There is no significant drop in food production. On the contrary, crops such as soy and others are expanding leading to the conversion of tropical forests and savannas into plantations. The increasingly competitive conditions under which crops are produced, the responsibilities pushed down in the supply chain, under growers and their workers, which translate into poor labor conditions, the unsustainable use of land and water, the economic incentives not reachable to small farmers, these are issues that we should be concerned about instead of predicting doomsday scenarios based on questionable evidence. The food security could be strengthened by agricultural upgrading and training in developing countries that would ensure more than a subsistence agriculture, international cooperation and long lasting partnerships with actors at the other end of the supply chain (retailers and brand owners). In order to accomplish these objectives and to tackle the problems of food insecurity and hunger there are a number of solutions that could be adopted in the production of crops such as maize, soy, wheat, corn and others. For more information, visit Fairfood International at the website http://www.fairfood.org.

Onana, while I fully agree with all that you have said, remember, this world is not working as it should and as we all know whether we want to admit it or not.

These shortages this article talks about are man made. The oil blowout that was a false flag itself will destroy our fishing industries in ways you can't yet imagine, like nothing else ever in the history of this planet.

You also don't realize those that are in control have an agenda, and population control and reduction is the agenda, without our involvement. If they took the issues you bring up and we sat down publically and discussed them and brainstormed, we could solve them ourselves and cooperate in solving them, but those that rule us are not humanitarians, they have an agenda and its geared toward TOTAL POPULATION CONTROL and slavery. We are assets to be branded, marked, herded, and controlled like cattle.

In fact, one faction of the theives has said so publically in a quote from back in 1982. They have worked toward that agenda ever since. They are starving Africa and destroying crops and weather manipulation is preventing germination at a time it needs to happen and just look at the oak trees that should be in full bud by now. Nothing. No buds. Between chemtrail dumping, weather manipulation, using the chemtrails and HAARP, they can insure both floods and droughts which both destroy our food supply and don't forget the various food bills sitting in congress right now, that will inhibit our ability to feed ourselves and thus must rely on them for our very survival. I kid you not.

So, get educated about what is going on around and find out what is happening that is dangerous to us, our health, our vertility etc. etc. etc.

My friend Vatic, Fairfood International does not investigate conspirators nor has as goal to uncover conspiracy stories. While the governance of international financial institutions (or International Bankers as you name them) is questionable and the efficacy of their advices in improving the wellbeing of people from developing countries and not only is far-fetched, they are not for sure the only ones to blame for environmental degradation, social decay and economic deprivation.

Our organization is more pragmatic in fighting these problems and contributing to the alleviation of hunger and poverty across the globe. By having food and beverage brand owners as our primary target group, we strive to engage them in sustainable practices during production, processing, sourcing and/or trading of their FOOD BRAND PRODUCTS. We are don’t have a holistic approach by focusing on the companies themselves mainly because growing consumer concerns about brand products associated with ill-treatment of workers and labor exploitations in farms and factories, toxic production wastes and emissions, soil and water contamination, use of hazardous chemical substances, deforestation, chain bribery and corruption, discrimination and other forms of human rights violations, could cost brand owners their reputation as well as financial disadvantages.

Onan, yes, I know. I found that out way back 9 years ago when I predicted and tried to warn people about what was coming as a result of 9-11 and guess what? It happened, but then it was a conspiracy theory designated by those who refuse to deal with reality.

Yes, I am sure you are educated as am I, BA in Political scienc, three years working as a legislative Research analyst for the House of Representatives, masters in finance, WITH A MINOR IN MACROECONOMICS, (global economies and systems), thus I am anything but a wing nut.

All my predictions bases on knowledge, facts and evidence, came true and we are living with it today. Economic destruction, trillions in wealth extracted globally, IMF and Goldman Sachs raping and pillaging of third world economies and taking over and privatizing their water, shoving GMO seeds down their throats, legally preventing seed saving for these poor farmers that had been going on for generations etc.

Denial is the partner of corruption and tyranny. Neither of those two can exist without denial on the part of the victims. Don't bother responding, I have 9 years of experience dealing with those who are blind and refuse to see the truth. Further discuss is always useless.

I found this web page on May,26 2010. I am 53 years old and ever since I was a small child I have seen things that others don't or can't understand. They always come true. Recently a food issue has come to bother me and in a disturbing way. What I see is a lot of rice and beans (which I hate) but I am being shown that's all there is to eat. I decided to go on line to see if I could make since of my latest vision. There is no question in my mind what I saw in this repeated vision will come true. Three other disturbing visions will follow but they won't be enclosed at this time. OK say I am crazy but everyone who knows me are now starting to put away food for days to come. God Bless Us All! Jean in PA.

So where are shortages? We're in the middle of the next growing season and I'm not hearing any talk of impending disaster. I'm seriously just curious because I was quite alarmed by this article six months ago - so much so that I added to my food storage because of it. Not a bad thing, but I'm not seeing the doom predicted by this article.

ne fifth of China's rice crop destroyed this year, large failures of Canada's wheat crop due to flooding, and a huge drop in Russia's wheat crop due to drought and now wildfires. Oil in in the gulf affecting seafood currently and for years to come. All this and a world food reserve that continues to shrink every year. You likely won't notice a shortage in G20 countries just a rise in prices but in many other countries there will be famine and starvation.

Has anyone seen the latest news on wall street? Russia, our largest supplier of wheat, has just halted all exports of wheat through the end of 2010. Revelation 6:6...I don't try to fit current events into scripture....but dang if this one don't fit all by itself :)